The Bank of Canada increased its target for the overnight rate to 4.75 per cent, with the Bank rate at 5 per cent and the deposit rate at 4.75 per cent.
The Bank is continuing with its quantitative tightening. Since the last announcement in April, the Bank’s Government of Canada bond holdings have declined from around ­­­­­­­­­$340 billion to around $323 billion in May.
CPI inflation in April reached 4.4 per cent. The Bank continues to expect that CPI inflation will ease to about 3 per cent within the summer. The Bank, however, is concerned that CPI inflation could become stuck above 2 per cent given excess demand persisting and three-month measures of core inflation between 3.5 and 4 per cent for several months.
GDP growth for the first quarter of 2023 was stronger than the Bank expected, coming in at 3.1 per cent. The Governing Council says it will continue to assess core inflation and CPI inflation outlooks while evaluating the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour to ensure they remain in line with the Bank’s inflation goals.